Thursday 03/27/14

It appears that overbooked Chinese soybean importers have diverted shipments to the United States, split between deliveries to the East Coast and the Gulf of Mexico.

DTN analysts report that three industry sources in the U.S. and Brazil say that 20 cargos, or roughly 18.4 million bushels, that were originally booked for delivery to China have been sold to the United States in the past week.

One source noted that China rolled another 20 shipments to a later delivery date. Another source added that an additional six or seven cargo loads could be on their way to the U.S. soon.

"The global soybean situation is interesting because the U.S. doesn't have the supplies to meet its current commitments and China has overbooked," DTN Senior Analyst Darin Newsom said. "The result is an equally interesting coming and going of ships leaving port in the U.S. headed to China while at the same time, China may be redirecting some of its purchases from Brazil to the U.S."

An article in the Wall Street Journal on Thursday morning highlighted that private Chinese importers were backing out of deals on soybeans and rubber, "adding to a wide range of evidence showing rising financial stress in the world's second-biggest economy."

The article went on to say: "But now as jitters rise over the health of the economy, the fallout is rippling through into agricultural commodities, just weeks after the price of copper and iron ore tumbled on worries they had been used in risky Chinese financing deals." (You can read more here: http://on.wsj.com/…)

Those risky Chinese financing deals -- China's made them on soybeans, too. DTN China Correspondent Lin Tan explained in an article in late January that some Chinese importers used soybean import contracts to access credit in China's tight lending environment. Here's an explanation from that article:

"Companies have found they can get credit from the bank much easier by using soybean import contracts as collateral because it's normal import business. For example, a soybean importer signs a contract to buy beans, takes it to the bank and gets a loan. Often, they sell the beans to another crusher, or if the price is right, they'll cancel the contract and use the funds for other purposes."

China's soybean crushing margins are negative right now, another reason why they don't want more cargos to show up at their docks. After several years of rapid expansion, Tan told DTN there are two kinds of companies that could go bankrupt in this kind of market: the ones with no experience, and the companies that bought soybeans for financial reasons.

His sources in China indicate that at least three soybean crush companies could default on Brazilian bean purchases at a rate of about 10 cargos a piece.

The diverted shipments to the U.S. point squarely to tightness of U.S. domestic supplies. Newsom said USDA’s projected 35 mb of imports would fall well short of allowing the U.S. to meet its commitments. To do so would require at least two to three times that amount.

"The idea that it is better for shipments to be coming to the U.S. now rather than waiting for early summer is spot on," Newsom said. "Again, it is another indication of just how tight U.S. supplies are and how tight merchandisers are expecting them to get. By June we would be scraping the bottom of the bins, leading to a skyrocketing inverse in the futures spreads and extremely strong basis. This way it may be a more orderly short supply rally into summer."

Mon Mar 30, 2015 11:15 AM CDTSome points on the grain shipping system are less frozen than they were last year; some are not. The first barge has moved through Lock and Dam 2, but Duluth has yet to see its first ocean-going vessel.

Mon Mar 30, 2015 11:14 AM CDTSome points on the grain shipping system are less frozen than they were last year; some are not. The first barge has moved through Lock and Dam 2, but Duluth has yet to see its first ocean-going vessel.

Mon Mar 23, 2015 11:42 AM CDTThe International Longshore and Warehouse Union plans to hold a caucus sometime during the week of March 30 during which 90 union delegates will decide whether to recommend a tentative agreement on a new five-year contract covering workers at all 29 West Coast ports for consideration by the union's full membership.

Thu Mar 19, 2015 08:55 AM CDTPlanting prospects, corn quality concerns, how to handle the closing of the pit trade ??? just a few of the conversations I overheard at this year's National Grain and Feed Association annual convention in San Antonio.

Mon Mar 9, 2015 11:46 AM CDTSeveral shipping groups and the National Grain and Feed Association are among those voicing support for the Surface Transportation Board's proposal to require railroads to publicly file various weekly data reports pertaining to service performance. The railroads say the reports are unnecessary.

Mon Jan 19, 2015 12:16 PM CSTThe ongoing labor contract dispute between the Pacific Maritime Association and the International Longshore and Warehouse Union is affecting service at several West Coast ports, according to trade sources

Wed Dec 31, 2014 02:47 PM CSTRailroads are reporting fewer delays thanks to good weather and less grain movement. Meanwhile, the ongoing labor dispute in the West Coast appears to still be far from reaching a resolution.

Mon Dec 15, 2014 11:20 AM CSTLogistic issues and an ongoing labor dispute in the Pacific Northwest are affecting imports and exports of all containerized commodities, according to commodity industry representatives.